I am a software entrepreneur who is currently an investor and board member in three startup companies. I have a B.S. in mechanical engineering. I was born in 1948. This chapter of my life is about trying to help people make their dreams come true. I started writing about economics because I hate the way that our dysfunctional economy is crushing the dreams of so many people. Young people are delaying getting married and having children because of unstable jobs and incomes. It doesn't have to be this way, and I want to contribute to solving the problem. I believe that prosperity is possible.

General Motors Is Headed For Bankruptcy -- Again

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.

GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.

In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market. For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011. With a loss of market share comes a loss of relative cost-competitiveness. There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.

To help understand why GM keeps losing market share, let’s look at the saga of the Chevy Malibu.

The Malibu is GM’s entry in the automobile market’s “D-Segment”. The D-Segment comprises mid-size, popularly priced, family sedans, like the Toyota Camry and the Honda Accord. The D-Segment accounted for 14.7% of the total U.S. vehicle market in 2011, and 21.3% during the first 7 months of 2012.

Because the D-Segment is the highest volume single vehicle class in the U.S., and the U.S. is GM’s home market, it is difficult to imagine how GM could survive long term unless it can profitably develop, manufacture, and market a vehicle that can hold its own in the D-Segment. This is true not only because of the revenue potential of the D-Segment, but also because of what an also-ran Malibu would say about GM’s ability to execute at this time in its history.

GM is in the process of introducing a totally redesigned 2013 Chevy Malibu. It will compete in the D-Segment with, among others, the following: the Ford Fusion (totally redesigned for 2013); the Honda Accord (totally redesigned for 2013); the Hyundai Sonata (totally redesigned for 2011); the Nissan Altima (totally redesigned for 2013); the Toyota Camry (refreshed for 2013); and the Volkswagen Passat (totally redesigned for 2012).

Automobile technology is progressing so fast that the best vehicle in a given segment is usually just the newest design in that segment. Accordingly, if a car company comes out with a new, completely redesigned vehicle, it had better be superior to the older models being offered by its competitors. If it is not, the company will spend the next five years (the usual time between major redesigns in this segment) losing market share and/or offering costly “incentives” to “move the metal”.

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Agreed 1000%. I’ll never buy a GM vehicle because I won’t give a dime to another GM Union employee as long as I live in this world. PERIOD. ANYTHING connected to Obama has failure written all over it in capital letters stretched from decadent E coast to W coast.

Same here. We always had GM trucks in our business and several GM cars. Never again, but that’s because Obama stole the $50,000 bond from us to support the Union. This money was my husbands total inheritance from his mother and we put it in a GM bond-what a mistake that investment was. Too many legacy costs with GM and they’re not getting it that Hyundai and Kia don’t have that and do a better job besides. Get a hint GM!

And you should probably work on your reading skills. As he abundantly and clearly points out, the 2013 Malibu is a clear step back from the prior model – which sold well as both of you point out – according to many in the industry.

It’s intellectually dishonest to just count cash. Yes they have $31.6B in cash and cash equivalents but $24.5B in short term payables (or total ST assets of $60B vs. ST liabilities of $48.9B). Again, this is just their short term issues. All things considered their balance sheet is a mess and their income statement will not hit $4/share.

You say, “GM currently has enough cash in the bank and liquid assets on hand to buy back ALL of it’s shares at the current market price if it chose to do so.”

Doesn’t “Security Analysis 101″ teach you that this means that the markets are saying that the “enterprise value” of GM is less than zero? The current GM stock price implies that they expect Akerson to take all of GM’s liquidity and pour it down the drain.

The markets agree with the author. You do, too, unless you are a buyer of GM stock at the current price.